Finance Ministry is keen to make the rules easier for FDI but is not in favour of putting any composite FDI caps, perhaps at the moment, as reported in the press. It has been clarified that all sources of foreign investments, FDI, FII and Private equity are all lumped together
From the press reports, it is clear that various ministries are keenly interested in pushing for foreign direct investment (FDI) proposals. In fact, on 1st October, it appears the Foreign Investment Promotion Board (FIPB) plans to consider some 26 FDI proposals. Finance Secretary, Arvind Mayaram, heads this Board and the press reports show that the pharmaceutical sector alone prominently figures in seven proposals that may come up for discussion on Wednesday.
However, there appears to be some small confusion or conflict of ideas starting with the Department of Economic Affairs, which wants a clear cut definition of a "foreign investor. Rightly so, as at the moment, any corporate body with a majority foreign holding is "treated" as an overseas investor which requires various government approvals.
Only about two weeks ago, Prime Minister Narendra Modi sought the Railway Ministry to come up with a comprehensive plan for attracting FDI. The Railways, for instance, have not yet come up with a plan or target for FDI, though it has hopes to generate some Rs6,000 crore through public-private-partnership.
It seems the Finance Ministry is keen to make the rules easier for FDI but is not in favour of putting any composite FDI caps, perhaps at the moment, as reported in the press. It has been clarified that all sources of foreign investments, FDI, FII and Private equity are all lumped together.
In the meanwhile, only last week, while speaking to the huge Indo-American audience, PM Modi stated that very soon the PIO (persons of Indian origin) and OCI (Overseas Citizen of India) would be "merged" together to form a new, unnamed category, but that would obviously cover people of Indian origin of every kind. We must remember that there is a very thin line of demarcation in all these categories.
To digress further on this subject, let us take a look at NRIs (non-resident Indians). NRI is a person, generally on an oversea assignment, who may stay abroad for any length of time - sometimes for decades - and who may not have acquired nationality of the country of residence; it is also possible that some countries do not offer this facility, and so, the NRI continues to hold Indian nationality and may return back to India at any time.
The second category, classified as PIO - person of Indian origin - which was introduced a couple of decades ago, covered those whose (probably) forefathers migrated abroad, a long time ago, during the British rule, and who subsequently became citizens in the country of residence, such as West Indies, UK, South Africa, Malaysia, Singapore, Ceylon (Sri Lanka) and Fiji etc.
The third category, identified as OCI, was recently introduced (about 10/12 years ago) which enabled the citizens, who had surrendered their Indian nationality so as to obtain naturalised citizenship of another country, such as UK, USA etc. Some countries have the facility for dual nationality, but in the case of India-USA, while the later accepts this, India does not. However, a former Indian citizen, who obtained, let us say, US nationality, is entitled to seek and obtain a OCI certificate, but, to become a full-fledged Indian citizen with voting rights etc, he needs to surrender his US nationality!
The point is that most of the Indians in the above categories are well to do, and are in a position to invest. There are many already doing this, like the Hindujas and Mittals of UK. It is therefore necessary when, under the FDI regulations, when such tycoons to wish to invest huge sums of money, they need to be protected in a fair and square manner. The question raised by Department of Economic Affairs, seeking to have a clear cut "definition" of a "foreign investor" assumes great importance.
Prima facie, as long as the "foreign" investor basically complies with the rules and regulations applicable, there is no need to hurry up and settle this matter in haste. Why not keep this issue in abeyance, and get on with the task of inviting FDIs to come and "make" things in India and export? Let's get more knowledge and experience in dealing with these matters, because there are probably more than 30-50 million Indians, falling in all the three categories, who are potential investors and who love the country of origin.
(
AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
